Managing Risk: Save or Toss? What to Do With Client Files

Determining file-retention periods is not an exact process. Risk-management and ethics factors should always be considered when deciding if closed files may ever be disposed of and, if kept, for how long.

Over the years, I have heard hundreds of different questions from attorneys at CLE programs and State Bar conferences. Popular topics include client selection, communication with clients, fee collection, billing, and technology. Another topic that has been raised more frequently lately is file storage and management. The common refrain is, “How long should I keep all those files I have at my office?”

As with most things in the law, there is no magic answer. But certain factors must be considered.

I have been in law firms that have basements with shelves full of files, some going back 30-40 years. Certainly you don’t have to keep all files permanently: that just doesn’t make much sense. Nor is the solution as simple as a one-size-fits-all rule for when to destroy closed files (for example, toss everything after 10 years). File retention and destruction is more complex than that.

The most important thing to remember is that the file is owned by the client, not the lawyer. If a client or former client asks for a file, a lawyer must turn over everything that is “reasonably practicable to protect a client’s interest.” SCR 20:1.16(d).

Keeping Closed Files

There are reasons to keep files after a matter has been resolved. One reason, of course, is to help defend against an allegation of malpractice. Wisconsin Lawyers Mutual Insurance Co. (WILMIC) claims attorney Brian Anderson says having written documentation of your representation can make defending a claim much easier.

“That is especially true if it contains evidence of the work done on a particular matter. Sometimes written documentation is the best source for that information. In some cases,” Anderson says, “our insured lawyer and the client disagree or have different memories of what was said and done. It is certainly more difficult to defend a lawyer in a malpractice matter if the lawyer does not have written correspondence, notes, and other documentation in the file. Clients often have very specific recollections of what was said or done, and without written documentation to the contrary a jury will likely side with the client.”

As a lawyer, you may have handled hundreds or even thousands of cases, making it more difficult to remember the specifics of each case. Anderson says, “This is why the information in a file becomes so important and why a lawyer should never underestimate the importance of a well-documented file. Credibility is a critical factor for defending a malpractice claim. When a lawyer says he or she is not 100 percent certain exactly what was said or done and the client claims just the opposite – that he or she remembers exactly what was said and done – it casts doubt on the case.”

How Long Should You Keep Those Files?

There is no easy answer to this question. In some cases, it makes sense to keep files indefinitely. The trick is figuring out which files you can destroy after a reasonable and appropriate period of time and which files you should keep.

Your firm might have a file-retention policy, which can provide some direction to attorneys and staff as to the length of the firm’s standard retention period and help identify the files that should be kept longer than others.

Spell out in your retainer letters how long you keep files and reiterate this information in closing letters. For example, you might write the following: “Consistent with our firm’s standard practice, we will be destroying your file in 10 years. Should you wish to review your file and copy any additional information, please let me know as soon as possible.”

From a malpractice perspective, Anderson says a good starting point for answering the question of how long to keep files is to consider how long claims take to surface. “Statistically, most claims come in within three years of the time the work was done. After three years, the chances of a claim are dramatically reduced.”

Of course, that doesn’t mean that claims never will surface long after a matter has closed. WILMIC has had claims that have come in five years, 10 years, even more than 20 years after the alleged error. But those are very uncommon.

Anderson says a general rule of thumb for file retention is anywhere between seven and 10 years. “That’s a reasonable choice, given the statistics,” he says. “Pay attention to what kind of file it is: estate planning files should be kept at least until the death of the testator, plus six years; files regarding minors must be kept at least six years after the period during which the minor could make a claim; litigation files could probably be destroyed sooner; family law and real estate matters, as well as original wills, should probably be kept longer.”

Anderson says there is a reason for this. “In Wisconsin, the tort of legal malpractice has a six-year statute of limitation; however, the discovery rule has been adopted. The reason cases involving estate matters or real estate should be kept longer is to account for the fact that a client may not reasonably discover an error for years after the attorney prepared the document or concluded work on the matter.”

Electronic Client Files

Today, many lawyers are storing documents electronically. Some firms store both active and closed files in electronic format. The Wisconsin Supreme Court Rules require a lawyer to protect and preserve open and closed client files, and they do permit a lawyer to keep a client’s file in an electronic format to the extent possible, by scanning paper documents and retaining them in the firm’s computer system.

Remember that the file is the property of the client and you as the lawyer are obligated to safeguard the file’s contents. That means you must use reasonable care to ensure the confidentiality of electronically stored client files and ensure that any security measures are reviewed periodically so that such measures stay current. If you back up your files with a third-party Internet service provider (ISP), also known as using the “cloud,” you should ensure that 1) the third-party vendor understands your obligation as a lawyer to keep the information confidential; 2) the third party is itself obligated to keep the information confidential; and 3) reasonable measures are employed to preserve the confidentiality of the files. [Editor’s Note: See “Encryption Made Simple for Lawyers” at page 7 of this issue.]

Many technology experts believe the cloud is more secure than the server you have at your law firm. Their caution, generally, is to make sure you know what you are purchasing when you go to that third party. Sometimes, it’s a matter of “getting what you pay for.” The cheapest is often not the best.

Nerino Petro, advisor to the State Bar of Wisconsin Law Office Management Assistance Program, wrote about cloud-based services in a Wisconsin Lawyer article in September 2012, and his comments still hold true. “Ultimately, whether a specific Internet/cloud product or service meets a standard of reasonable care is a question that must be answered by each attorney until more definitive guidelines are provided. A key factor to remember is that none of the ethics opinions issued require extraordinary efforts or a 100 percent guarantee that information will not be inadvertently disclosed; instead, they require that attorneys use reasonable care in selecting a service provider to handle this confidential information.”

In addition, the Supreme Court Rules require that lawyers retain any original documents that have an economic, legal, evidentiary, personal, or other value in their original form. SCR 20:1.1, 20:1.15, 20:1.16. This would include documents such as wills, documents of title, birth records, some contracts, and personal photographs.

Conclusion

Where to store files and how long to keep them are perennial issues, the resolution of which depends on each individual lawyer’s comfort level, the type of documents, and the areas of practice in question. The following steps and considerations, however, are always applicable:

Protect yourself with a written record of each case in the event a defense is needed in a malpractice claim.

Maintain the confidentiality and security of files.

Stay in compliance with the Supreme Court Rules.

Consider the area of practice and whether the type of case in question could require holding onto files longer.

As we move deeper into the electronic age, more lawyers are scanning files and saving them electronically. Nothing in the Wisconsin Supreme Court Rules prohibits lawyers from maintaining client files in electronic format. They do require lawyers to adequately protect and preserve those files, maintaining confidentiality and security, on whatever server is being used.